Compaq to post Q4 profit

HOUSTON: Compaq Computer Corp. on Monday said it expects to post a profit in

the fourth quarter, not a loss, on revenue of more than $8 billion, in a sign

that the struggling personal computer industry had a better-than-expected

quarter.

The results are above the previous forecast from Compaq, the No. 2 personal

computer maker, for revenue of $7.6 billion to $7.8 billion and a loss of 3

cents a share.

Compaq's earnings surprise is the second positive sign for the technology

industry in the past week. Semiconductor stocks soared last week after the

release of industry data showing improved sales in the fall, making a recovery

more likely.

The news also comes at a time when it and competitor Hewlett-Packard Co. are

trying to convince shareholders that their proposed merger is a good one.

Investors have had doubts about that merger since it was announced on Sept. 4.

In the late autumn, members of both the Hewlett and Packard families said

they would vote their combined 18 per cent stake against the merger. "These

results represent strong execution and Compaq's solid momentum in the

marketplace," Compaq Chief Executive Officer Michael Capellas said in a

statement.

Earlier on Monday, Lehman Brothers analyst Dan Niles said Compaq had a good

fourth quarter because both demand from consumers and corporations was strong,

despite concerns that the HP merger plan would hurt corporate sales.

"The merger uncertainty being a big concern hasn't seemed to affect

their corporate demand as much as we would have expected, so we think Q4 ended

up pretty well for both consumer and corporate for them," Niles said. The

upside surprise comes on the back of a quarter in which Compaq warned of lower

results and then posted a loss of 7 cents per share.

Compaq lost its top spot among PC makers in 2001 as demand slowed and

competitor Dell Computer Corp. launched an aggressive price war that hurt

Compaq's margins. Analysts were expecting a loss of 3 cents per share on revenue

of $7.63 billion in the fourth quarter, according to Thomson Financial.

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